This article is initially available on our podcast. Click here to listen. This is a follow-up podcast to the one we did just recently about the patient net collection rate. The question is, “Can you have greater than 100% in a net collection rate for patients?” The short answer is, “You can, but you should not.”
I have to say we have seen this. We’ve run into situations where we see that the practice’s overall total net collection rate is more significant than 100%. That doesn’t make any sense until you dig in and determine why and why it should not be that way.
Calculate the patient net collection rate
In terms of from the last podcast, just a note how to calculate patient net collection rate. Suppose you don’t have a transfer field in the system that indicates how much was transferred to the patient. In that case, you can calculate it by taking charges, subtracting insurance payments, subtracting insurance adjustments, and then any other insurance write-off fields, or if those are somehow distinct. If you remove all those things, you should be left with a balance that rolls over to a patient.
We recently calculated a patient net collection rate for practice, and we did get greater than 100% for the office (OF) visits in a clinic. Suppose you want to know how that’s possible. It wasn’t the first time we’d seen it. We were utterly dumbfounded in practice the first time we saw that, and we had to dig in. If you dig in, you may find that “Wow, some patients had balances that were never paid.” That should, in theory, mean that you’re actually at less than 100%. So if 10 of them got paid at $100 per person or something like that and one of them got unpaid, you should be at less than 100%.
Find copay discrepancies
This one was greater than 100%. It turns out what was happening was, the front desk was taking a copay even if there wasn’t a copay required or taking a larger copay than was required: $50 even if only $20 were required or something like that. It was probably to be conservative and to be safe, and that’s not a bad practice. If you don’t know what the copay is, you take something. Or if you’re not sure what it is, maybe you take a more considerable amount than it might be, again, that way that you’re safe.
Don’t take the wrong copays
How do we know that they were taking the wrong copay? It wasn’t because we asked them. We could see it in the data. When we looked at the patient transfers in the records, we would see that there was a, for example, $50 payment, but transferred only a $25 balance to the patient. Therefore, there was a mismatch between what was owed by the patient and what was paid. Therefore, $25 was owed, $50 was collected. That’s a 200% net collection rate for patient accounts receivable.
We’re not Big Brother. We’re not trying to get anyone in trouble. We’re not notifying anybody that that’s the case. We found that they did not refund the money to the patients who had taken more than what was owed once they figured out what that was. Often, this can be dealt with when a patient comes into an office. When you have a statement that goes out to the patient that handles coinsurance and deductible, you should adjust it at that time when that net balance goes out to the patient. If there’s some excess, then you send, on a rare occasion, an amount to the patient. Or if the patient is coming in for serial visits, then you credit that against the next visit. But that wasn’t what’s happening.
Be open to revising processes
Many practices may not want to hear this type of an issue. This is effectively a compliance issue that impacts revenue because the typical response is, “Wait, what?! I mean, we’re already hard-pressed financially. We’re getting crunched. This is a miserable experience anyways, and they’re going to take advantage of the situation. What? Are we going to make even less money? We’re already struggling. Forget that.”
Like questions of fraud in practice, would you want to know if someone in your organization is committing fraud? What if it is financially benefiting the practice or the practice owners? If you might have to give up money, give that money back to an insurance company or something like that. That may be a very bitter pill to swallow, but it’s probably better than the alternative, which is someone comes looking at some point or potentially someone comes knocking at the door.
Prevent legal ramifications
What happens when a series of patients complain, and the payer figures out that there’s a pattern where more money has been charged to patients than is appropriate according to the contract. Further, if it’s a government payer, like Medicare or Medicaid or something like that, then you might run into severe legal ramifications, not civil but criminal charges potentially.
At the very least, in civil cases, they will audit the practice, or they will lock everything down until they can determine what’s going on and then stop paying. They may take all the money back or, possibly worse, include some penalties or interest or something like that. It’s not uncommon for some provision in commercial insurance contracts that they can do things like that. Or worse, you might have a large insurance company drop a contract.
Determine the consequences
The ramifications of this can be severe. It’s worth knowing. It’s a relatively easy way to look at this and determine this. It’s also not a large amount of money. So it’s not worth the impact of collecting the couple extra percent of the insurance balances there because you’re talking about a percent of a percent. On average, the percent balances are significantly less than the majority of the insurance balances. We’re talking about a small percentage of that minority insurance percentage.
So run a quick analysis to determine if patients are getting overcharged and then correct the process in the future.